Issuance of notice u/s 143(2) is mandatory and non-compliance of the same will result in nullifying the assessment orders

[Vivek Jalan]

Hon’ble SC In the case of GKN Driveshafts (India) Limited v. ITO - 2002 (11) TMI 7 - SUPREME COURT, The Hon’ble Supreme Court has laid down an elaborate procedure as to the manner of dealing with objections raised against a notice under The Income Tax Act. An Assessee may raise objection on the reasons formed by the Assessing Officer. The Assessing Office is to take note of these objections and must dispose of the same before commencing reassessment by passing a “speaking order”. Where the Assessing Officer passed an order of reassessment without hearing objections of Assessee, it was held that the Assessing Officer had acted arbitrarily and, in a manner, clearly contrary to law in passing an order without disposing of the objections of the Assessee and such order was liable to be set aside. Hence, non-issuance of notice under section 143(2) of the Act is not a curable defect. The failure of AO in reassessment proceedings to issue a notice under section 143(2) prior to finalizing the reassessment order cannot be condoned.

Further, the interplay of Sections 143(2) and 148 of the Act formed the subject matter of at least two decisions of the Allahabad High Court. In CIT v. Rajeev Sharma 2010 (5) TMI 600 - ALLAHABAD HIGH COURT it was held that a plain reading of Section 148 of the Act reveals that within the statutory period specified therein, it shall be incumbent to send a notice under section 143(2) of the Act.

However, the legislature, vide Finance Act, 2008 introduced Sec. 292BB which gave immunity to the Department by applying Principle of Estoppel in cases where an assessee has appeared or co-operated in any proceeding relating to an assessment or reassessment, it shall be deemed that any notice required to be served upon him, has been duly served in time and such assessee shall be precluded from taking any objection against the same, except before ‘completion of assessment’. It was observed by P&H High Court in Rajbir Singh, Karta of Ch. Kesho Dass (HUF), [2010 (12) TMI 910 - PUNJAB AND HARYANA HIGH COURT] that purely technical objections carrying no substance that came in the way of assessment proceedings were taken care by introduction of this section. In today's insight, we have tried to compile rulings on the aforesaid aspects and more.

In this backdrop, The Hon’ble ITAT in the case of JABALPUR DEVELOPMENT AUTHORITY VERSUS A.C.I.T., CIRCLE-2 (1) , JABALPUR [2024 (1) TMI 999 - ITAT JABALPUR] held that the issuance of notice u/s 143(2) is mandatory and non-compliance of the same will result in nullifying the assessment orders.  As regards the provision of Section 292BB of the Act it was held that in the present case the issue was regarding non-issuance of notice itself and there was nothing on record to prove that the notice u/s 143(2) of the Act was issued by the AO. Therefore, the protection under Section 292BB of the Act was not available to the Department.

This case could thus be used as a precedent in similar cases.